Golden Research Thoughts

Volume 2, Issue. 7, Jan. 2013

ISSN:-2231-5063 Available online at www.aygrt.net

ORIGINAL ARTICLE

GRT
GREEN BANKING IN INDIA

S.G. KHAWASPATIL AND R.P. MORE

Asst. Prof., Yashwant College, Nanded,

Asst. Prof. Zeal Institute of Management and Computer Application Pune.

Abstract:

Sustainable enlargement can best be achieved by permitting markets to work

within an appropriate framework of cost efficient regulations and economic instruments.
One of the major economic agents influencing overall industrial activity and economic
growth is the financial institutions such as banking sector. In a globalised economy, the
industries and firms are vulnerable to stringent environmental policies, severe law suits
or consumer boycotts. Since banking sector is one of the major stake holders in the
Industrial sector, it can find itself faced with credit risk and liability risks. Further,
environmental impact might affect the quality of assets and also rate of return of banks in
the long-run. Thus the banks should go green and play a pro-active role to take
environmental and ecological aspects as part of their lending principle, which would
force industries to go for mandated investment for environmental management, use of
appropriate technologies and management systems. This paper explores the importance
of Green Banking, sites international experiences and highlights important lessons for
sustainable banking and development in India. However, we find that there has not been
much initiative in this regard by the banks and other financial institutions in India though
they play an active role in India's emerging economy. Therefore, we suggest possible
policy measures and initiative to promote green banking in India.

KEYWORDS :

Green Banking cost efficient, economic growth, ecological aspects.

INTRODUCTION

Americans are starting to turn to eco-friendly banking as a way to help reduce the carbon footprint
from their normal banking activities. This movement away from branch and paper banking is being led by
green banks that believe in social responsibility.
Online banking is easy way for green banking. Benefits of online banking include less paperwork,
less mail and less driving to branch offices, which all have a positive impact on the environment.
Interestingly, online banking can also increase the efficiency and profitability of a bank. Banks reduce the
cost from paper overload and bulk mailing fees as more customers use online banking.
Green banking can also trim down the need for expensive branch banks and customer service
representatives. So if a bank is not yet utilizing green banking, then bank will face over cost other than.
Banks can do much more to help the environment than just promote online banking. A truly green
bank will reduce their carbon footprint by building more efficient branches, implementing energy-efficient
operational procedures, offering transportation services for their employees, promoting sustainable
banking and increasing their lending in environment-sensitive industries. Banks can also support eco-
friendly groups and raise money for local environment initiatives.

Title : GREEN BANKING IN INDIA

.Source:Golden Research Thoughts [2231-5063] S.G. KHAWASPATIL AND R.P. MORE yr:2013 vol:2 iss:7.
 GREEN BANKING IN INDIA

LITERATURE REVIEW:

Concepts Review:

Green banking is like a normal bank, which considers all the social and environmental/ecological
factors with an aim to protect the environment and conserve natural resources. It is also called as an ethical
bank or a sustainable bank. They are controlled by the same authorities but with an additional agenda
toward taking care of the Earth's environment/habitats/resources.
Green Banking as a concept is a proactive and smart way of thinking with a vision for future
sustainability of our only Spaceship Earth - as design science explorer Richard Buckminster Fuller called
our Earth

RESEARCH REVIEW:

Green banking: Banks can achieve lasting growth in Germany by offering sustainable financial products

· A Roland Berger study shows that green banking offers significant potential for traditional
financial institutions
· In Germany, three million bank customers now take advantage of green or social banking products
– six million customers expected by 2015
· Investment volumes in Germany are growing by about 22% each year. A total investment volume
of EUR 100 billion is expected by 2015
· To benefit from the megatrend of sustainability, traditional banks must rethink their structures,
partnerships and investment strategies

· Special banks and the food sector: role models with regard to sustainable products

The market for green banking has strong growth potential, especially in Germany. At present,
three million bank customers are taking advantage of green or social banking products. This number could
increase to six million by 2015, as a growing number of bank customers want to know more about how their
money is invested. With average annual growth of about 5%, the investment volume for sustainable
financial products is expected to reach EUR 100 billion by 2015. Low-risk savings products could be the
main drivers of this growth. However, traditional banks have quite some catching up to do when it comes to
such products. Above all, banks must gain the trust of their customers by ensuring that funds are invested in
a transparent manner. Small specialist banks and the food sector have been pioneers in the area of
sustainability, as shown in a new Roland Berger study. Entitled "Green banking: Significant growth
potential for banks", the study is part of the think: act CONTENT series.
"A growing number of consumers are opting for sustainable financial products when investing
their money. For this reason, the banking sector should look to the food sector for guidance. The success of
organic foods in recent years is a strong example of how companies can benefit from market growth with
sustainable products," says Wolfgang Hach, Partner at Roland Berger Strategy Consultants.

OBJECTIVES OF STUDY

The main objectives of this study are to find out;

Green banking evolution in India and its approach in Indian banks.

Awareness of bank customer about green banking
How green banking beneficial to consumers (Individual s corporate)

GROWTH OF GREEN BANKING

The most important themes of twenty first century are the Environmental protection and
sustainable ecological balance and it become a important issue that must be considered by all functional
areas including banking. Green banking involves environmental and social responsibility. This word is new
in Indian banking and it appeared in 2009 when there were concern on environment conservation and it was
realized that banks can play a big role in this movement. Green Banking encompasses a wide variety of
banking services. The banks are providing finance to primary metallurgical industries, paper and pulp,
pesticides / Insecticides, fertilizers, chemical / pharmaceuticals, textiles etc and bank may play a big role by

Golden Research Thoughts • Volume 2 Issue 7 • Jan 2013 2

 GREEN BANKING IN INDIA

scrutiny of investment projects from the environmental angle Banks are now started to obtain NOC from
respective state pollution control board. Many banks are promoting online banking services as a form of
green banking. Benefits of online banking include less paperwork and less driving to branch offices by bank
customers. Green banking also reduces the expenditure of bank and branch by minimizing the use of paper
work and mailing fees. Thus green banking not only important for environmental point of view but also
mitigate the credit risk, legal risk and reputation risk.

Drivers & Trends of Green Product Development

The demand for environmental products and services, particularly green financial products and
Services, is on the rise in North America. Comparing this green evolution of North America's
attitudes to those abroad, it becomes apparent why North America's financial institutions have been slower
in offering green banking products and services. However, this comparison indicates the direction in which
new product and service offerings are headed.
Three overarching drivers and trends are behind the emergence and growth of green product and
service demand:

Environmental Knowledge & Media Coverage:

The information age has enabled an unprecedented understanding of the severity, sources and
implications of various environmental challenges. Higher levels of media coverage about these issues,
along with multinational environmental campaigns and outreach initiatives have helped improve the
general public's understanding of the issues.

Environmental Awareness & Public Opinion: A relatively high degree of environmental awareness and
government support for environmental sustainability in Europe has driven ever-growing consumer demand
for “eco-friendly” products and services. Recent opinion polls, corporate initiatives, and shareholder
actions suggest a similar environmental awakening is building momentum in North America.

Environmental Regulation & Legislation: Regulatory actions, particularly those which provide price
certainty in environmental markets and those that prohibit unsustainable practices, can significantly
stimulate demand for green products and services among bank clients. In Europe, proactive governmental
policy, such as the European CO2 Emissions Trading Scheme, German feed-in-tariffs for renewable energy
and Dutch Green Funds, has helped trigger both demand for, and development of, greener consumer
options. As environmental understanding and awareness grow in North America, along with the emergence
of more stringent environmental regulation, so too will the demand for products and services aimed at
fostering environmental sustainability. This demand will also expose new business opportunities, leading
to a diverse array of products and services in many sectors. Organizations that have the foresight and
capacity to tap into this desire by consumers to affect positive environmental change may experience
benefits ranging from improved corporate image to increased growth and competitiveness in the
marketplace.
Given their intermediary role in the economy and far-reaching customer base, financial
institutions will be well-positioned to benefit from the design and marketing of new green products and
services, while furthering their contribution toward sustainable development

Product of Green Banking

Bank products and services can also reflect a green banking commitment.

Green Deposits: Banks can offer higher rates on CDs, money market accounts, checking accounts
and savings account if customers opt to conduct their banking activities online.
Green Mortgages and Loans: A bank can offer green mortgage with better rates or terms for energy
efficient houses. Some green mortgages allow home buyers to add as much as an additional 15 percent of
the price of their house into loans for upgrades including energy-efficient windows, solar panels, geo-
thermal heating or water heaters. The savings in monthly energy bills can offset the higher monthly
mortgage payments and save money in the long run.
The Energy Efficient Mortgage (EEM) is a type of HUD-approved green mortgage that will credit
you for your home's energy efficiency in the mortgage itself. Many home improvements also qualify for the
energy tax credit. Anyone undertaking an energy-saving house project, should shop around for a bank that

Golden Research Thoughts • Volume 2 Issue 7 • Jan 2013 3

 GREEN BANKING IN INDIA

offers a special rate for a green mortgage or loan.

Green Credit Cards: A green credit card allows cardholders to earn rewards or points which can be
redeemed for contributions to eco-friendly charitable organizations. These cards offer an excellent
incentive for consumers to use their green card for their expensive purchases. Imagine the millions of
dollars that could be raised for worthwhile environmental groups if green credit cards really took off.
Green Reward Checking Accounts: A bank product called reward checking accounts pays a bonus rate for
customers who go green. Customers can earn higher checking account rates if they meet monthly
requirements that might include receiving electronic statements, paying bills online or using a debit or
check card. With this banking product higher rates and eco-friendly living go hand-in-hand.

This pursuit of sustainability also typically translates to other benefits including the following:

Access to capital market Compatibility Position

Reporting allows for enhanced
performance profiting sought by
lenders, business partner&
customers.
Investor Interest
Sustainability reporting is
important parameters to attract
investor.
Cost Saving
Tracking the energy management
practices of the company gives an
opportunity for improvement
which translates into reduced raw
material cost, reduced energy cost.
I ¨ Consumer & stakeholders
T ¨ Demonstrating ‘I Care’
N
A ¨ Reflecting of corporate
T Improved consumer Relation
N Governance
A ¨ Indicate the superior Biz. Mgt.
G Benefit
N ¨ Improve the stakeholder value.
I s ¨ Mitigate business risk.
G
B Brand Enhancing
I
L ¨ Responsible performance is vital
B
R to brand value & trust.
L
¨ Bring to limelight in a structured
R manner all initiative taken in all
s ocial environmental & Economic
front

CONCLUSION

The study concludes that in-spite of a lot of opportunity in green banking, RBI notifications,
Indian banks are far behind in the implementation of green banking only some of banks have initiated
towards green banking. There is more scope for all banks and they can not only save our earth but can
transform the whole world towards energy conscious. Banks must literate their customers about green
banking and adopt all strategies to save earth and build banks image.

REFERENCES:

1. Mukesh Kumar Verma, Green Banking: A Unique Corporate Social Responsibility Of Indian Banks,
(2012) International Journal Of Research In Commerce & Management (Volume No. 3), Issue No. 1
2. Sahoo, Pravakar and Nayak, Bibhu Prasad, (2008), Working Paper submitted to Institute of Economic
Growth, New Delhi.
3. Sharma, Nishi, “CSR practices and CSR reporting in Indian Banking sector”,(2010), International
Journal of advanced economics and business management,
Vol. 1, Issue 2, pp58-66
4. RBI Notification, (2007), CSR in Indian Banks
5. Websites of respective banks viewed on 01 Oct 2011.
6. http://greenbankreport.com.
7.www.ey.in.

Golden Research Thoughts • Volume 2 Issue 7 • Jan 2013 4

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